Lord Best
Main Page: Lord Best (Crossbench - Life peer)Local Government Finance Bill
Lord Best Excerpts“Power to make discounts discretionary
(1) Section 11 of the Local Government Finance Act 1992 (discounts) is amended as follows.
(2) In subsection (3) leave out from “or” to the end and insert “such other percentage as the billing authority may determine”.
(3) Omit subsection (4).”
Lord Best
My Lords, I declare my interest as president of the Local Government Association, which has formulated this amendment, and I pay tribute to the LGA and its leadership for its commitment to progressing this important issue. Noble Lords may have seen the letter from the group leaders of all the political parties at the LGA urging the Secretary of State to give local authorities the discretionary powers which this amendment would provide.
Amendment 98B is in my name and that of the noble Lords, Lord Jenkin of Roding and Lord Tope. I am extremely grateful to those two supporters and their colleagues on the Conservative and Lib Dem Benches who have given invaluable backing to the amendment. It is my strong impression that this is an example of your Lordships’ House drawing the attention of the Government and all Members in the other place to a matter that, earlier in the life of the Bill, did not have the recognition that it deserves.
I have been thrown a bit by the Minister’s announcement of a new transitional grant, to which I shall return. However, ignoring it for the moment, the situation can be set out quite simply. In localising the council tax benefit scheme, the Government will reduce by 10% the amount they currently pay to fund support for poorer households. This will contribute some £460 million towards deficit reduction in England. However, no changes are to apply to those in receipt of council tax benefit who are pensioners, which means that if the overall 10% cut has to be paid for by non-pensioners, they will face a reduction in their support not of 10% but of an average of nearly 20%, and up to 30% in areas where very many recipients of the benefit are currently pensioners. This payment of tax, which is equivalent on average to 20% of the local council tax, from around £3 per week to more than £5 per week, will have to come out of the very low wages or benefits calculated to be barely sufficient to cover people’s food, heating, clothing, et cetera.
The Bill gives local authorities discretion to raise council tax, which could compensate for this loss of their income by reducing the discounts currently available for empty properties and second homes. In some cases, these sources of additional income will raise much of the lost funding, particularly in more affluent areas where there may be many second homes and relatively few people receiving council tax benefit. For example, we heard earlier that the Royal Borough of Kensington and Chelsea, where the Minister was a distinguished leader, will be able to leave the council tax position alone and raise enough money from other sources to cover this loss of central government support.
In the vast majority of places, however, using discretion to vary discounts for empty and second homes will not raise enough to balance the books if councils wish to preserve the level of council tax support currently going to the poorest households. Many local authorities will therefore find themselves having to tax those on very low incomes. Quite apart from their concern for those households struggling with rising food and fuel bills, as the noble Lord, Lord Smith of Leigh, spelt out, those local authorities are deeply worried that this new requirement imposed on them raises enormous difficulties in extracting taxes from people who do not have the money to pay. It is true that local authorities have the powers to go to the courts and send in the bailiffs, but chasing the poorest households for small sums of money each week is a nasty business that is fraught with administrative and moral hazards.
I am delighted that pensioners are to be protected from this new benefit cut. I want to see the same support continuing for people with disabilities who are dependent on benefits, those working on the lowest wages, those on jobseeker’s allowance looking for work, and single parents with young children, all of whom are trying to get by through difficult times. A number of these households are already facing reductions in the support that they receive for their housing costs; and many hundreds of thousands will be charged the new bedroom tax—averaging £14 per week for those deemed to have one spare bedroom and £25 per week for those deemed to have two—from the same day, 1 April 2013, on which they could have to start to pay council tax for the first time.
The lesson we learnt clearly when this House expressed concerns over the similar issue of that bedroom tax was that there was no point in simply opposing a benefits cut since the other place would immediately claim financial privilege and throw out the offending amendment, even where your Lordships’ passed an amendment with a very large majority, as it did before Christmas when there were two iterations of amendments to diminish the impact of that other measure. The amendments were not even considered in the other place because of their financial implications. Amendment 98B, therefore, is not intended to have any cost implications for central government. It is cost-neutral.
The saving of £460 million in England will still be achieved. As I understand it, this actually represents a better contribution to deficit reduction than would now be the case next year following the Government’s new announcement of the transitional £100 million grant for 2013-14. However, this amendment would enable local authorities to raise the funds to bridge the gap in their funding without having to pursue those on the very lowest incomes. How can this saving be achieved? The amendment would give local authorities the discretionary power to vary the single person discount, currently fixed at a standard 25%, which goes to all single person households, including some who may be in this House. Indeed, this discount gives proportionately more to those living in the most valuable homes. The amendment provides local authorities with the flexibility to raise the money needed but to do so without taxing those who currently receive the council tax benefit.
The Bill already gives councils the discretion to reduce discounts for empty properties and second homes. This amendment would also give them the discretion to vary the single person discounts. If across the piece these SPDs were to be reduced from 25% to 20%, those single person households would still get four-fifths of the discount they currently receive, and the extra revenue for councils would almost exactly compensate for the loss of £460 million of central government grant and would enable local authorities to maintain support with the council tax at current levels for all households. In fact, because councils will be able to raise extra revenues from their other discretionary powers in respect of second homes and empty properties, the LGA’s calculations show that pensioner single households at all income levels could continue to receive their full single person discount. That includes some Members of this House, I mention again. A reduction in the SPD for non-pensioners from 25% to 20% would still raise enough—some £313 million—to balance the books.
Baroness Hanham
My Lords, I thank the noble Lord, Lord Best, for introducing this amendment. I do not like not agreeing with him either—he is someone whom I think everyone admires in this Chamber and whom I have known for a long time—but disagreement there is going to be. I note that the noble Lord opposite said the same thing.
I start by declaring an interest in that I receive a single person discount, and very welcome it is, too, but I am not starting out from that basis today. The amendment is about the local authority’s discretion to change the rate of council tax to a single person, which it can discount by 25% at the moment. The noble Lord suggests that that could go down to 20%. As has been pointed out, that is not what the amendment says. It says that you could remove the discount. Local authorities could be left going from 25% to 0% on the back of it. There is nothing in it at all to limit this to a reduction to 20%. If the noble Lord did that, I am absolutely certain that there would be objections from all around that that was not localism, it was restrictive, and that if we wanted to go further down this discount route the right thing would be to have the full range. We have to be very careful about this.
It is also true, as my noble friend Lord True said, that we have never consulted on reducing council tax discounts. This is a tax and there has been no consultation on that at all. In effect, even if we accepted that the discount would go down to 20%, it would be a potential tax increase for over 8 million people who at present receive the single person discount. It would hit them. There has been some sort of idea all through this debate that this would have no effect on people who are poor. That is ridiculous. Lots of people who are poor pay council tax. They are in a position of being in property, having to pay council tax and getting suitable benefits for that. They might be single parents, lone pensioners or—there was an aside about this—people living in a big house. People live in big houses because they start in them. They do not particularly want to sell that house, and would probably get to the state where they do not know how to because it is so complicated. Why should they move? Why should they not be entitled to that single person discount? That does not mean that they are rolling in money. They are not. We have to dispel the idea that everyone who receives a single person discount can afford to give it up. That is a false impression and we cannot allow it to go on.
To reinforce that, over three-quarters of the claimants of the single person discount live in bands A to C, with over a third living in band A. Only 10% of claimants live in properties that are band E or above. This is not a tax that can be reduced just for the rich. It is very much a tax borne by people who are not particularly well off. However much we might say that they “only” have to lose a certain amount of money, they would only have to lose, as other people would, money that they cannot afford.
The amendment would undermine the fundamental principle behind council tax. I was fascinated by how the noble Earl, Lord Lytton, trailed through all the forms of property and council tax that there have been. Rates were certainly not popular. The principle behind council tax is that it is part property and part personal tax, and is based on two people in occupation. It is clearly defined. The discount reflects the fact that there is only one person in the property, where it is clear that one person does not make as much use of services as a family would. It also has a wide range of support. It is clear and easy, and people understand that it is a relief just for a single person. As my noble friend Lord True and I said, the Government did not consult on changing this discount, as it is a tax, in the consultation on technical reforms to council tax and have no plans to change that.
Noble Lords have previously commented on the amount of revenue that might be raised by reducing the rate of discount. I sound a note of caution on that. People losing the single person discount under this amendment, such as single pensioners and lone parents, might ultimately find themselves in greater need of help to pay their council tax. They might need benefit, so that would not be very helpful. This would mean curtailing the impact of any additional resources, putting more people in need of state support and creating unintended pressures on councils. I am sure the House would agree that that is not quite the hoped for consequence of the amendment.
The technical reforms to council tax in the Bill change the way empty properties are treated with a view to bringing them more quickly back into use. That may also generate welcome additional revenue for local authorities. However, as I said, changing the single person discount would lead to a significant hike in tax on a very large number of people. The amendment would also affect the operation of council tax discounts for empty dwellings. The default discount that applies where there is no resident of a dwelling could be varied by the billing authority. This change is not necessary as the Government already plan to extend authorities’ discretion over discounts for empty dwellings. We discussed that in Committee.
I understand that noble Lords have concerns about local authorities’ ability to make savings and to raise revenue from the flexibilities in the system at the moment. We have offered transitional support, which has been sneered at a bit today. I hope that with a little more time and consideration noble Lords and local authorities might appreciate that that is a helping hand, even if it is for a year at this stage. It is important that we recognise that the Government have made a significant move here. As a result of what I and other noble Lords have said, and the fact that this is a government initiative—so the coalition is wrapped up in it—I cannot support the amendment of my friend the noble Lord, Lord Best. I am sad about that because I normally like to do so. I hope he will withdraw the amendment.
Lord Best
My Lords, I am enormously grateful to all noble Lords who have participated in this debate. I will pick up on one or two points that have been made. I am deeply grateful to the noble Lord, Lord Jenkin, who reminded us of the poll tax riots and told us to learn from experience. Those were wise words. I am extremely grateful to the noble Lord, Lord Tope, who made the point that there is a shortfall that must be met. Can it not be met by people other than the poorest? I was grateful to my noble friend Lord Bichard, who felt that this was a practical way of helping those in most need and was a last chance to do something. My noble friend Lord Palmer had done the arithmetic and made the point that it would be very easy to collect a reduction in the single person discount as opposed to the incredible difficulty of trying to collect from people who have never paid tax before. The noble Lord, Lord Shipley, made the point that with no increase in council tax because of the freezes, the better off will be paying no more tax next year, but the poorest, rather paradoxically, will pay for the first time. He emphasised the value of localism.
The noble Lord, Lord True, was the first voice contrary to the mood of the House at that stage that this amendment was well worth pursuing. His comments were reflected in some of what the Minister said. I will take those points together. The noble Lord made the specific point about Richmond that if the single person discount was abolished altogether, people would face a council tax increase of £6 per week. He pointed out that that would clearly be significant. However, he mentioned that if the reduction was confined to a reduction from 25% to 20%, the worst situation for those people would be nearer to a £1 a week rise, which does not sound as bad. That was certainly the intention behind the amendment.
The noble Earl, Lord Lytton, gave us a wonderful history lesson and supported the whole essence of localism that is built into the arrangements that we would be extending with flexibility under the amendment. The noble Lord, Lord Smith of Leigh, with some reluctance, felt it important to support the amendment. There are better ways, but we have to be careful that we do not go for the best and drive out the good. This is our best shot to make a significant difference. The noble Lords explained that the amendment would be very helpful to places such as Wigan, even if it is not a panacea that would solve all the problems there.
I turn to the noble Lord, Lord McKenzie. I fully recognise that without the support of the opposition Benches, the arithmetic of this House means that it is impossible for me to carry an amendment tonight. I am sorry that political differences came into play outside the scope of Cross-Benchers. The noble Lord makes the point that a broader approach is needed. No one would disagree with that. He makes the same point as the noble Lord, Lord True, and the noble Baroness that the amendment could mean more than a reduction from 25% to 20%. Because it is an open amendment, it could mean abolishing the single person discount altogether. That could be painful to people on lower incomes. He makes the point that the amendment does not exclude pensioners. Many would argue that, at whatever income level, they should be removed from the equation. He is not sure about how the distribution from council to council would work. Richer local authorities may do better, and we need some more work on that. However, the better amendment proposed from the noble Lord’s Benches has failed to get support. Therefore, I hope that something lesser might find acceptance on his Benches. It has not so far.
The Minister also made the point that some restriction on such an amendment, so that it could not lead to the single person discount being removed altogether, is important. She points out that the single person discount has a justification and a purpose. The noble Lord, Lord True, also mentioned that. It is hard to argue that a 25% reduction for single people equates with any precision to the difference between the services required by a single person household and a household with more than one person. Indeed, as pensioners are included, single pensioners require a lot of services which a household with two pensioners does not require, because those people look after each other. It does not follow that if you are on your own you necessarily cost less. If you are a single parent with several children, you may be costing the local authority a good deal. It does not follow that a single person household necessarily uses fewer services from the council.
As a general principle, I do not argue that the single person discount does not have some merit, but a reduction from 25% to 20% can be argued just as easily as the retention of a 25% line. Any amendment that would find favour in your Lordships’ House is likely to be more precise about that. It is likely to state that the level of discount should never be less than X—perhaps 20%. There should continue to be such a discount. Perhaps it should state that pensioners should be excluded. As the Minister pointed out, that would reduce the amount of localism in the amendment, but perhaps an amendment that contains such an element would be more likely to find favour with your Lordships. My colleagues and I need more time to see how the £100 million transition plays into that. Every little helps, and I know that local government is grateful for that amelioration, relatively modest as it is.
This is not the time for me to press the amendment. I, and I hope others, have learnt that different forms of an amendment might find favour across the House, and I reserve the right to return with a different amendment at Third Reading. At this stage, I beg leave to withdraw the amendment.
Baroness Hollis of Heigham
My Lords, I will be brief. Many years ago, as a Norfolk and Norwich councillor, I found that the then MAFF, the Ministry of Agriculture, Fisheries and Food, was giving grants to Norfolk farmers to drain the Broads wetlands and that the then DoE was at the same time giving the same farmers grants not to take up the grants. We have a similar problem here in the interaction of the Bill with the Welfare Reform Act. That is not helped because the interaction between the two departments, at least on this issue, is clearly fraught. That is most obvious over housing benefit, which came up in our previous debate.
DCLG has a more appropriate definition of bedrooms to families than has DWP. DWP’s new HB rules penalise couples where one has a moderate disability—asthma or arthritis—and needs a separate bedroom but will receive HB not for the two bedrooms that they currently have and need but for a one-bedroom flat, if they or their social landlord can find one. Middle-aged couples, one with disturbed and disturbing sleep, but who are reduced to a one-bedroom flat, will be sofa-surfing in their new home if they cannot afford to take the benefit cut that they would face if they stayed put. Someone with asthma or emphysema, sofa-surfing at 55 in their own home—it is awful.
We could perhaps help one small group of disabled people with more severe needs. They are those disabled people whose socially rented property has an extra bedroom and would normally be in a higher band—say, band C—but, because of their disability needs, have had their council tax banding dropped from C to B. However, for housing benefit purposes, they may well be judged to be underoccupying and have their benefit cut. The amendment states simply that anybody who has had a band reduction by DCLG should not thereby be caught by DWP’s underoccupation rules for housing benefit purposes; they should be exempt.
We are not talking about large sums here. Sam Lister from the Chartered Institute of Housing has kindly produced for me an estimate of those affected, based on top-down departmental statistics, for which I am most grateful. It is an estimate, but it accords with my own hunch work, bottom-up from several authorities and grossing up those figures. There are 125,000 properties in England with a band discount, usually on grounds of disability. Leaving aside band A, which would not normally be overoccupied, that gives 110,000 people in discounted properties. Excluding owner-occupiers, whom HB would not affect, and pensioners, who would not be affected by HB, we estimate that the number of households affected across England—and, perhaps, Wales—would be between 2,200 and 3,000. The cost of protecting their current HB levels so that they are not hit by an underoccupation charge would, including Wales, come to between £1.8 million and £2.1 million.
In some cases, their properties may have been adapted for them by the social landlord, and DWP has allowed that it would be a false economy to shuffle them into somewhere smaller and then have to readapt the new property. However, many such couples—perhaps most—are simply in large properties, such as the middle-aged couple who need all three bedrooms of their flat or bungalow, one each for sleeping and the small, third bedroom for equipment. Anyone who has cared for a disabled person, as many in this Chamber today have, knows how much equipment can be needed: the wheelchair, the oxygen tanks, the nearly new mattress that has been temporarily replaced by a water mattress, the commodes, the tray tables, the cradles, the backrests and the banana boards. I could go on.
Under the new HB rules, those 2,500 disabled families with a reduced CTB because, according to DCLG, they need that extra space, could still be hit by the bedroom tax contrived by DWP, which says that they do not need that extra space, at a cost to them of between £15 and £20 or more. This amendment would simply allow those with a reduced band by virtue of their disability, as recognised by one part of government, to be exempt from the bedroom tax imposed by another part of government. This would bring consistency between the two departments and would be the right thing to do for families who are usually poor and certainly disabled. It seems self-evidently just. It may be that the Government propose to protect such families and I very much hope that the Minister can say that they will do so, in the same way as she was helpful in Committee in telling us that council tax band reductions would continue. If not, I hope that your Lordships will support this amendment. I beg to move.
Lord Best
My Lords, I have put my name to this amendment as well. As a long-time campaigner on the famous bedroom tax, I am very supportive of this amendment, which I think affects only between 2,000 and 3,000 households. For them, however, it would be very important and to have a double whammy would be disastrous for that group. I support the amendment.
Baroness Hanham
My Lords, we discussed this in Committee and, while I appreciate and understand the intention behind the amendment, the trouble is that this would reopen debates that I know have already been had on what is now the Welfare Reform Act. The Government do not plan to revisit what is in that Act. Blanket exemptions for specific groups, including for disabled people and those living in adapted accommodation, were extensively discussed then. I appreciate that the noble Baroness has now reduced this exemption to thousands of people rather than tens of thousands, but the fact of the matter is that it reopens something which I do not think we can reopen here.
Blanket exemptions can also be an inefficient and complex way of targeting resources, so the Government favour discretionary housing payments to help meet any shortfalls between a person’s rent and a housing benefit award. Noble Lords will recall that we announced that an additional £30 million would be added to the discretionary housing payments fund from 2013-14. This is aimed specifically at two groups: disabled people living in significantly adapted accommodation and foster carers. Local councils make the decisions on them on their individual circumstances. However, I assure the House and the noble Baroness that the Government have no intention of changing the long-standing council tax disabled band reduction scheme and that anyone in receipt of a reduction will not lose it as a result of the underoccupation measure. As I say, I cannot support this amendment and I hope that the noble Baroness will feel able to withdraw it.